Correlation Between Alliance Data and FirstGroup Plc
Can any of the company-specific risk be diversified away by investing in both Alliance Data and FirstGroup Plc at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alliance Data and FirstGroup Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and FirstGroup plc, you can compare the effects of market volatilities on Alliance Data and FirstGroup Plc and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alliance Data with a short position of FirstGroup Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and FirstGroup Plc.
Diversification Opportunities for Alliance Data and FirstGroup Plc
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alliance and FirstGroup is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc and Alliance Data is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alliance Data Systems are associated (or correlated) with FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of Alliance Data i.e., Alliance Data and FirstGroup Plc go up and down completely randomly.
Pair Corralation between Alliance Data and FirstGroup Plc
Assuming the 90 days trading horizon Alliance Data is expected to generate 1.22 times less return on investment than FirstGroup Plc. In addition to that, Alliance Data is 1.17 times more volatile than FirstGroup plc. It trades about 0.06 of its total potential returns per unit of risk. FirstGroup plc is currently generating about 0.08 per unit of volatility. If you would invest 185.00 in FirstGroup plc on November 3, 2024 and sell it today you would earn a total of 9.00 from holding FirstGroup plc or generate 4.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.5% |
| Values | Daily Returns |
Alliance Data Systems vs. FirstGroup plc
Performance |
| Timeline |
| Alliance Data Systems |
| FirstGroup plc |
Alliance Data and FirstGroup Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and FirstGroup Plc
The main advantage of trading using opposite Alliance Data and FirstGroup Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data position performs unexpectedly, FirstGroup Plc can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FirstGroup Plc will offset losses from the drop in FirstGroup Plc's long position.| Alliance Data vs. Geely Automobile Holdings | Alliance Data vs. ecotel communication ag | Alliance Data vs. CITY OFFICE REIT | Alliance Data vs. OFFICE DEPOT |
| FirstGroup Plc vs. Take Two Interactive Software | FirstGroup Plc vs. Broadridge Financial Solutions | FirstGroup Plc vs. Gold Road Resources | FirstGroup Plc vs. Unity Software |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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